Unifi, Inc. New

Good day and thank you for standing by. Welcome to Unify's second quarter fiscal 2022 conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star then one on your telephone keypad. Please be advised today's conference may be recorded. If you require operator assistance during the call, please press star then zero. I'd now like to hand the conference over to A.J. Ecker, Vice President of Finance. Please go ahead.

Thank you, Liz, and good morning, everyone. On the call today is Al Carey, Executive Chairman, Eddie Engel, Chief Executive Officer, and Craig Creatore, Chief Financial Officer. During this call, management will be referencing a webcast presentation that can be found at Unify.com and by clicking the conference call link. Management advises you that certain statements included in today's call will be forward-looking statements within the meaning of the federal securities laws. Management cautions that these statements are based on current expectations, estimates, and or projections about the markets in which Unify operates. These statements are not guarantees of future performance and involve certain risks that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, forecast, or implied by these statements. You are directed to the disclosures filed with the SEC on Unify's forms 10Q and 10K regarding various factors that may impact these results. Also, please be advised that certain non-GAAP financial measures, such as adjusted EBITDA, adjusted EPS, adjusted working capital, and net debt, may be discussed on this call. I will now turn the call over to Al Carey.

Well, thanks, AJ. Good morning, everyone. Thanks for joining this call so that we could cover the unified second quarter results. I'll begin with an overview of the quarter. And then I'm going to turn it over to Eddie Engel and Craig Kreator, who will take you through the details of our company's performance in Q2. And then we're going to have a Q&A after that. So to get started, let me just say that I'm enthused about our company's growth potential, especially when you look at the 24% revenue growth in this quarter. But I want to say up front that the underdelivery on profit for the quarter is largely due to U.S. labor shortages in our plants, which has hampered our ability to produce product to the customer demand. We expect that to improve, and we'll talk more about this in the next few minutes. On the sales front, our demand for our products continues to be strong in Q2, and it makes it the sixth consecutive quarter of sequential growth. We're ahead of forecast, and we achieved $201 million in sales, which is a milestone for us. The momentum is going to continue for the next two quarters And we feel confident to say that our revenue forecast could now be raised to $800 million in sales for the fiscal year 2022. For perspective, you're going to have to go all the way back to 2003 to see the last time we achieved $800 million in sales at Unify. So it's a big move forward for us. We also expect the trend to continue beyond fiscal 2022 because we now have all three of our regional geographies with positive top-line momentum. And Reprieve brand continues to accelerate. So in this last quarter, Reprieve got to 40% of our mix, which is the first time we've achieved that level, and the growth on Reprieve was above 30%. We also see Reprieve expanding more rapidly into non-apparel products such as footwear and automotive and industrial furnishings and PPE. This is something that our team's been working on for about a year. And it's coming into reality now, and Eddie will talk about that in a little bit. But our retail brands and our customers are really moving forward with using recycled materials so that they can achieve the sustainability targets in the 2025 goals and their 2030 goals. So it's been a very positive trend for our business. Now, a key point for this past quarter. Our unified sales revenue was plus 24% versus a year ago. but the performance could have been better. It should have been above 30% if we had the labor to produce for all the orders that were in hand in the U.S. plants. Now this labor shortage is something that's a macro issue. It's affecting our industry and many industries. It's the whole issue of higher turnover and difficulty hiring and training people fast enough to get them to replace the turnover people. That difficulty also comes with an extra cost, and it's causing inefficiencies in the plant for the time being. And it's also keeping us from producing to the consumer demand. This dynamic that I'm speaking about on labor has caused about two-thirds of our $4 million miss for EBITDA in the quarter. The other one-third comes from not getting all of the pricing passed along to cover our costs in Q2, but I can tell you right now that those increases have happened by January. So will the labor issues improve? And the answer is yes. Our team has reacted by making sure that we're competitive on wages, we're investing quality training for our new people, and we're even experimenting with new methods of managing our frontline teams. And all of these things are beginning to work. But it will take a little bit more time as this recent COVID uptick has caused some quarantines in the plants so that this labor issue will drift into Q3, but should see improvement by the end of Q3 and significant improvement in Q4. For example, two weeks ago we had 100 people in quarantine in the North Carolina plants. This week we were 70. That should improve as the weeks go on. So we have our work cut out for us on U.S. labor, but we know what to do. We have strong sales momentum in all three geographies. Brazil and Asia's gross profit performance remains strong, and reprieve is now 40% of our mix. On labor, we're listening to our frontline employees. We're trying to find out, and we make sure that they feel that their jobs are more rewarding and they're proud of where they work. And interestingly, as we do extensive roundtables in the plants, if you ask your people how to accomplish this, they have most of the answers, and then you have to act on them. So finally, let me just say this. I really like the strong management team that we've assembled here at Unifi. I like the agility that they're demonstrating as we work through all the curveballs that the pandemic has been throwing us over the last two years. And because of that, I'm quite certain that we're going to be a stronger company coming out of the pandemic than we were going into it. So with that, let me turn it over to Eddie Engel, our CEO, who will take you through more of the details of our performance.